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Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

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Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#971

Post by phpisthebest »

oarabbus_ wrote: post #771
machina_ex_deus wrote: post #702

Earlier quoted context omitted.

Banks have lost all excuses to be making money out of other people's deposits. If those deposits are guaranteed by the government, and backstopped by the government, then there's absolutely no reason banks should be able to invest any of them. There's absolutely no excuse left for why banks get to invest any of their clients money. They get free leverage from their clients for free. They can send it to zero and the e…

>If those deposits are guaranteed by the government, and backstopped by the government, then there's absolutely no reason banks should be able to invest any of them. >Revoke banks ability to invest deposits. They can't get to have the cake and eat it too. They could offer higher interest rates for non guaranteed accounts which bear risk, or zero risk for the already zero interest rates. You are missing something cruc…

>>Who will loan the government tens or hundreds of billions of dollars besides the banks?

Wait, I have a novel idea...

HOW ABOUT THE FEDERAL GOVERNMENT STOPS BORROWING (and spending) SO MUCH DAMN MONEY!!!!

I know, crazy idea that the government should (outside extreme conditions) have a balanced budget and not run deficits in perpetuity

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#972

Post by partiallypro »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

If this were a middle America community bank failure with deposits from a bunch of farmers and factory workers that is a 0% chance they would have changed the rules. This happened because the tech industry has massive lobbying power.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#974

Post by Convolutional »

bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

> maybe stop tweeting images of guillotines when our employees are anxious about their next paycheck?

I've been watching Elon Musk, Marc Andreessen, David Sacks, Peter Thiel, Jason Calacanis and on and on rant for the past weeks/months/years about the homeless in San Francisco, how students don't deserve student loan relief etc.

Now you're finding a lack of empathy galling? These prep school scions and maladroits, mostly wafting in angel/VC parasitism suddenly do an about face and beg for a government bailout. Of course they have been paying the piper and we hear before the weekend is over that their sweetheart deposits have been bailed out by the full faith and credit of the US taxpayer.

The structure of all of this points one way, and the intentions of a handful that are "outspoken about disagreements with the techbro culture" has no effect on that.

The reckoning did not come this week but it is coming, tweeted images and all.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#975

Post by eatsyourtacos »

mberning wrote: post #934

Nothing is going to change in this country until people start questioning how we have seemingly limitless money for foreign aid, wars, bank bailouts, etc. but we can’t seem to get shit done for working class people. It’s not a left vs right issue. It’s a class and power issue.

Infinite money to "save the system" but no money to guarantee basic healthcare to everyone.

Gotta love it.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#976

Post by HPMOR »

fidgewidge wrote: post #885
HPMOR wrote: post #606

The discourse on this thread and Twitter is astoundingly inept. If the FDIC had permitted uninsured depositors to not be made whole, there would’ve been a systemic risk to American banking. Confidence in the banking system is critical to its well functioning. Quite literally banks are built by confidence that their depositors will get their money back. Discussing whether SVBs depositors should’ve taken a haircut miss…

It is not inept. People aren't however pointing out the actual switcheroo here: by the definitions everyone was using just 48 hours ago SVB was not systemically important nor did it post systemic risk. That designation was meant to be for financial institutions that were directly depended on by other financial institutions. Nobody is saying that's true here. What Yellen has done now is redefine "bank that poses syste…

You're correct, in that it was not immediately clear whether SVB warranted the systemic risk declaration. However, it should appear clear that fear is very contagious and it has never been easier to move tens of billions of dollars of deposits with just a few button clicks. This poses a sincere risk to banks not already declared Systematically Important Banks (SIBS). The Treasury and Federal Reserve correctly intuit that it would cost far more to the real economy, and to tax payers to cover the cost of SIBs then it would be to signal that uninsured depositors will be made whole.

Your claim that "those who believed in the honesty of the system got burned again", is not entirely true. Equity and debt holders have been completely wiped out. Compared to the Trouble Asset Relief Program (TARP), in 2008, this barely constitutes a bailout. Furthermore, if the Frank-Dodd stress test requirements for banks with greater than $50 billion had not been relaxed in 2018 to $250 billion, then SVB and Signature bank would have been seized and sold off well before there was this bank run. It is clear that even smaller regional banks need to face the same rigorous stress tests that SIBs face.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#977

Post by phpisthebest »

bcantrill wrote: post #490

I have never seen such cognitive dissonance here at HN -- which I feel is really saying something! As an SVB customer who had to wire payroll on Tuesday, our perspective is naturally sharpened, but I found the lack of empathy here over the weekend galling. On the one hand, this is understandable, and Silicon Valley has done much to earn collective distrust. On the other hand, this is emphatically not all of us: many…

>>many of us have been outspoken about our disagreements with the techbro culture,

If this is what you have identified as the core issue people have with Silicon Valley, then you have really really missed the mark and do not understand at all what many people, particularly in the so-called "Fly out Country" have a problem with

>>Well, if you want to see startups solving hard technical problems we need to have some real talk about how that has to be structured financially

I want to see startups build sustainable business models built around solving complex problems. Not chasing quick adoption, with the goal to be bought out by a Google, Amazon, or Atlassian

I want startups to be driven by something other than Quarterly results that the MBA's at the VC firm's demand

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#978

Post by sgregnt »

hn_throwaway_99 wrote: post #40

Yellen and the FDIC is in a tough spot. This is the important line, "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." Thus, on one hand, I'm glad they're doing this, as it should help prevent wider bank runs, and it ensures that banks are the ones that are actually paying for it. At the same time, this is yet another exam…

Communism

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#979

Post by danans »

kzrdude wrote: post #919
HPMOR wrote: post #606

The discourse on this thread and Twitter is astoundingly inept. If the FDIC had permitted uninsured depositors to not be made whole, there would’ve been a systemic risk to American banking. Confidence in the banking system is critical to its well functioning. Quite literally banks are built by confidence that their depositors will get their money back. Discussing whether SVBs depositors should’ve taken a haircut miss…

Shouldn't the goal be to create a bank ecosystem that is more robust? So that the failure of one does not lead to a domino reaction of failures?

> Shouldn't the goal be to create a bank ecosystem that is more robust?

You are seeing the robustness in the actions taken by the FDIC right now. Not all failure modes can be prevented ahead of time. There is no failure-proof banking system structure.

> So that the failure of one does not lead to a domino reaction of failures?

The "domino effect" in the context of bank runs is a result of human psychology, specifically herd panic behavior - not something that can be changed by the financial system. At best it can be tempered.

Re: Joint statement by the Department of the Treasury, Federal Reserve, and FDIC

#980

Post by JPKab »

spywaregorilla wrote: post #967
JPKab wrote: post #962

Earlier quoted context omitted.

Yellen is an incompetent ideologue. I studied applied economics in university, and the first code I wrote for a real application were inflation simulations. When she and the Fed made the claim a few years ago that "inflation was transitory" I ended up calling several of my smartest classmates. It was a nice excuse to reconnect, and universally all of us were asking what she was smoking. It wasn't just us. Larry Summe…

> Yellen is an incompetent ideologue. I studied applied economics in university, and the first code I wrote for a real application were inflation simulations. Damn if only the US government could find someone with credentials as strong as yours

That's the point. I don't think I'm qualified for the job, and yet it was obvious inflation wasn't transitory. The fundamental drivers with money supply and in particular, velocity, pointed this out clearly. A quick look at travel statistics in summer 2021 made it clear that a majority of the public was returning to pre-pandemic spending habits. She clearly isn't qualified, and simply failed upward into working for the administration. You don't have to look hard, far, or even outside of Democratic affiliated economists to find those who were far more accurate than the Fed, including the aforementioned Larry Summers, or Steven Rattner.

Your welcome to be critical of my statement, but where's your criticism of the people being paid high salaries in positions of power who utterly failed to react in a timely manner (when many many economists with tons of credentials were telling them to) and have now forced us into a worse situation?

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